December’s Personal Income and Outlays report showed a 0.3% increase in Disposable Personal Income (DPI), and a 0.5% increase in Personal Consumer Expenditures (PCE), with the difference made up by a 0.2% drop in the personal saving rate. Annual consumer spending was up by 3.8% for 2016, and the core PCE price index, the Federal Reserve’s preferred measure for inflation, increased by 0.1% to bring the annual rate to 1.7%.

The Federal Open Market Committee (FOMC) kept the Federal Funds Rate at 0.5% - 0.75% and continued their wait and see approach for further rate adjustments. They noted moderate improvements in the labor market, economic activity, and household spending, but found business fixed investment continued to be soft and inflation was below their target 2.0%. Rates will next be re-evaluated at the FOMC’s March meeting.

Increased hiring in Construction, Financial Activities, Professional Services, and Retail Trade helped create an unexpectedly strong 227,000 jobs in January, with a 0.2% increase in the workforce participation rate causing the unemployment rate to tick up to 4.8%. However M/M wage growth missed expectations at 0.1%, and December’s wage growth was revised downward to 0.2%, bringing the Y/Y wage growth to 2.5%.